Special Needs Trusts and Medi-Cal

reader of my article Special Needs Trusts Fundamentals inquired about using a Special Needs Trust (SNT) to supplement a parent’s Medicaid, while avoiding having to reimburse the state for those payments at the parent’s death. Of course, its beyond the scope of this web site to offer legal advice specific to anyone’s personal situation, but there are issues here I’d like to address.

Let’s presume that you are anticipating a parent will be entering a skilled nursing facility and wants the Medicaid program to pay the cost of that care. In California, where I practice, the Medicaid program is called “Medi-Cal” and it is the Medi-Cal program that I will be talking about.

Planning with Medi-Cal in Mind

The first issue that should be addressed in doing Medi-Cal planning is ensuring that the parent receives the care the parent needs for the remainder of the parent’s life. If the parent is not yet in a skilled nursing facility (SNF) or is not in a satisfactory SNF, attention must be paid to ensuring the parent’s acceptance at an acceptable SNF.

Sometimes admission to a SNF is not a problem, such as when the parent is admitted to a SNF with Medi-Cal paying the cost. But if this is not the case, the SNF’s approval of the parent’s financial situation will almost certainly be needed in order to gain admission. And, the SNF may have a waiting list, so the cost of the parent’s care during the wait should be allowed for. A SNF receives more money from private-pay patients, that is, patients who are not receiving Medi-Cal. Therefore, a SNF faced with a choice of a private-pay patient or a Medi-Cal patient to fill an empty bed, will choose the private pay patient. The parent will have a better chance of entering a good SNF if money is available to the parent to pay for the parent’s care, for about 9-12 months or so.

Given the current economic climate, the continued viability of the Medi-Cal program, is uncertain. This, too, should be considered when planning for the parent’s care and what can be done, if anything, to pass along an inheritance to the next generation.

Although there are many similarities among the Medicaid programs from state to state, there are also many differences. For example, there are periods of ineligibility for Medi-Cal if a person gives away countable assets to qualify for Medi-Cal. The Deficit Reduction Act of 2005 (DRA 05), a federal law, enacted very stringent penalties for giving away countable assets in order to qualify for Medicaid for skilled nursing care. However, in California, DRA 05 has not yet been implemented, as California has yet to create implementing regulations. Until it does, Californians will continue to operate under quite different rules than the rest of the United States. At this time, it appears that the regulations will be implemented some time in 2010.

Special Needs Trusts

With this in mind, an SNT to provide for the parent during the parent’s life would be preferred to outright gifts which are more likely to deprive the parent of funds needed for the parent’s care. However, creating a special needs trust for a person age 65 of over and who is either on or anticipating receiving Medi-Cal for SNF care raises the following issues, among others: capacity, financial elder abuse, and ineligibility periods for the benefits sought.

So, will it work to supplement a SNF Medi-Cal beneficiary’s care with their assets which somehow make their way to a SNT and avoid a reimbursement claim from California? It might be possible, depending on how it is done and when it is done. But this is a very risky endeavor and legal assistance should be obtained in developing and executing a possible plan.

The above is of course, intended as general information. Anyone wishing to implement this sort of planning should definitely retain an attorney knowledgeable in this area of the law as this sort of planning is complicated.